Empirical Study On The Cost And Incentive Effect Of Chinese List Companies

As a main form of Executive Stock Incentive Plan, the Executive Stock Option has developed dozens of years in the western countries. And it is always called"Gold handcuffs". Some list companies in China has begun to explore the way of Executive Stock Option, but the Executive Stock Option is still a newborn issue in China, the study on how to value the cost and incentive effect of Executive Stock Option is still in the first phase.This paper present the theory of pricing model and incentive plan of Executive Stock Option first. By using the datum of stock price of 45 list companies during 2002 and 2006 in public, measure the volatility and continuous expected dividend yield of the underlying stock by Maximum Likelihood Method.Hull-White Model which considers the characteristics of Executive Stock Option was chosen as the model pricing the cost of Executive Stock Option. The conclusions are as follows:(1)The relationship between the volatility and cost of Executive Stock Option is positive correlation, so do the volatility and incentive effect.(2) The stock price volatility of 45 list companies in the securities market in Mainland is lower than in Hongkong and higher than in the USA, so the cost of Executive Stock Option in securities market in Mainland is lower than in Hongkong and the incentive effect in Mainland is higher than in the USA.(3)The high-tech company chooses to come into the market in Mainland is a good way because of its lower volatility of stock price and lower cost of Executive Stock Option in securities market in Mainland.The conclusions above display a bright future of Executive Stock Option in Mainland, and we should improve the capital system and the structure of the company to provide a more fertile field in Mainland.